I have successfully negotiated short sales for almost five years. As a listing agent, a lot changed for me once the HAFA program became part of the landscape. As you may have read in Part 1 of this post, I went through a hellish experience with Aurora Loan Services and Bank of America while negotiating my first HAFA short sale. That transaction took over a year to close. As painful as the experience was, I gained some knowledge about the way these two lenders navigate the HAFA program that has helped me close my deals more efficiently since and hopefully help you close yours as well.
Here's the list of what I learned the hard way along with other good pointers:
- As soon as you take a listing, contact each lender/servicer and ask if the loans against the property qualify for the HAFA program. Investors have the option to participate in the program. Investors make decisions on a case by case basis. They may ask you to submit your package regardless but it’s good to ask upfront. Bank of America always tries to get the homeowners enrolled in HAFA, especially when dealing with first liens.
- If there is a second lien against the property, find out if it is a purchase-money loan or cash-out refinance. In my experience, purchase-money loans have a better chance of getting enrolled in the program. In California, second lien amounts are high. Therefore, second lien holders have a hard time accepting the $6000 maximum HAFA payoff, especially when the second lien was a cash-out refinance.
- Find out if there is mortgage insurance on any and all loans against the property. Mortgage insurers often do not participate in HAFA and if they do, they do so sparingly, especially with high-balance loans and cash-out refinances.
- If the second lien is not participating in the HAFA program or chooses to opt out, the seller cannot participate in HAFA at all. This is why it is so helpful to find out who's in and who's out at the very beginning of the process.
- Have your clients complete the HAMP forms, provide their financials, write their hardship letter and sign your third-party authorization as soon as possible. Before anything else, participating lenders will want to find out if their borrower qualifies for HAFA. Most will also request their borrower (your seller) to call or write a letter asking to participate in the program before submitting the paperwork. For copies of the HAMP forms, please click on the following link: http://www.makinghomeaffordable.gov/get-assistance/request-modification/Pages/default.aspx
- When dealing with Aurora Loan Services, be sure to ask and ask again to confirm your short sale is undergoing HAFA review. If you don't confirm, you may be stuck in the traditional short sale queue like I was, although I asked several times and was told we were good to go. The paperwork will be mailed directly to your seller. Aurora will not email nor fax copies to real estate agents.
- When dealing with Bank of America, it is important for your seller to call customer service at (866) 880-1232 and request to be enrolled in the HAFA program as soon as you take the listing. This initial call must be made by your seller. You will then be allowed to initiate your short sale in Equator without unnecessary delays. Keep in mind that if you have a short sale listing without an accepted offer, you should be assigned to AMS Servicing(AMS). If you have an accepted offer, you should be assigned to Loan Resolution Corporation(LRC). Unfortunately, it is not unusual for BofA's representatives to assign you to the wrong team.
- Even though Bank of America assigns all HAFA short sales to AMS and LRC, HAFA short sales can be negotiated in-house. After LRC said the investor on my client's second lien was not participating in HAFA, I was assigned an in-house BofA negotiator who -you guessed it- processed HAFA short sales.
- If you have an accepted offer, request the Alternative Request for Approval of Short Sale (ARASS Form) from both(all) lenders as soon as possible. Aurora will typically mail the form directly to your seller. LRC can upload the form into your Equator library. This will help you save some time.
- Be sure to add the $3000 Seller Relocation Incentive to your estimated closing statement. If the incentive is not in the HUD, some lenders will not pay it.
There is so much more to share but this was enough to get me through to the closing on this deal. If I had known all of this from day one, I very possibly could have had a September, 2010 closing instead of one in May, 2011. Again, happy short selling.